"Well, of course, Korematsu was wrong. And I think we have repudiated in a later case. But you are kidding yourself if you think the same thing will not happen again."
If you have been waiting for the "global economic crisis" to begin, just open up your eyes and look around. I know that most Americans tend to ignore what happens in the rest of the world because they consider it to be "irrelevant" to their daily lives, but the truth is that the massive economic problems that are currently sweeping across Europe, Asia and South America are going to be affecting all of us here in the U.S. very soon. Sadly, most of the big news organizations in this country seem to be more concerned about the fate of Justin Bieber's wax statue in Times Square than about the horrible financial nightmare that is gripping emerging markets all over the planet. After a brief period of relative calm, we are beginning to see signs of global financial instability that are unlike anything that we have witnessed since the financial crisis of 2008. As you will see below, the problems are not just isolated to a few countries. This is truly a global phenomenon.
Scratch one more bullish thesis for the housing recovery, and the economic recovery in general.
Having rallied yesterday and totally ignored the fact that Letta's 10-month-old government was about to collapse, Italian equity and sovereign bond markets are falling this morning by their most in two weeks. The main bone of contention for Renzi-Letta fight is jobs and growth - there is none of either - and while Prime Minister Letta assures that the Italian economy grew in Q4 (GDP data to be released tomorrow) for the first time in 10 quarters, as Bloomberg's Niraj Shah notes, real GDP is still smaller than it was in 2000. Letta has just canceled his UK visit (planned for 2/24) and did not take part in the Democratic Party meeting with a Renzi friend saying "[Letta] will resign." Italians are, of course, used to the farce that is politics - there have been 64 government since 1945.
Lured by the promise of jobs created by the oil and gas boom, unemployed people are flocking to North Dakota en masse. This is heralded by many in the mainstream media as great news - labor mobility at its best - however, there is a darker side: rents are surging and finding a place to live at any price is difficult. As Reuters reports, amid all the boomtime plenty, however, is a housing affordability crisis. North Dakota saw a 200% jump in homelessness last year, the biggest increase of any state - "people are coming because it's widely publicized that we have jobs, but it's not widely publicized that we don't have housing."
While loathed to admit it, US auto makers have done it again. As we have vociferously explained month after month (and has been vocally denied until now by the car makers themselves), much of the recovery in auto sales has been a massive channel-stuffing make-work program (mal-investment once again triggered by 'false' signals created by Fed intervention). Now, as the WSJ reports, Detroit's big 3 are trying to sweeten discounts to clear a massive inventory of unsold vehicles from dealer lots (desparate not to start a profit-killing price war). "We believe we can sell our way out," said GM, but as Morgan Stanley warns, "the best of the U.S. auto replacement cycle is over." Good luck...
As Deutsche Bank revealed in a note overnight, the GCC may have, quite deliberately, opened a Pandora's Box with its decision which according to Europe's largest bank, and the one whose derivatives exposure makes that of JPM pale by comparison, (i) made it clear it regards OMT as exceeding the competences granted to the ECB by the European Treaty and that (ii) would not consider itself bound by a positive ruling of the European Court of Justice. And while in DB's opinion this action does not have any immediate market consequences, the report's authors think that it "alters substantially the level of insurance we could expect from the ECB against any return of sovereign turmoil."
U.S. foreign policy is aggressive, reckless, belligerent, and meddling. It sanctions the destabilization and overthrow of governments, the assassination of leaders, the destruction of industry and infrastructure, the backing of military coups, death squads, and drug traffickers, and imperialism under the guise of humanitarianism. It supports corrupt and tyrannical governments and brutal sanctions and embargoes. It results in discord, strife, hatred, and terrorism toward the United States. The question, then, is simply this: Can U.S. foreign policy be fixed? We propose a four-pronged solution from the following perspectives: Founding Fathers, military, congressional, libertarian.
Are fish from the Pacific safe to eat? What about the elevated background radiation readings detected in Japan, and recently in California? Are these harmful levels? Should we be worried? And if so, what should be done about these potential health threats? What steps should we take to protect ourselves? Fukushima-related fears have been both overblown as well as heavily downplayed by parties on each side of the discussion. Much of this stems from ignorance of the underlying science. But some of it, sadly, seems to be purposefully misleading. Again, on both sides. To assess the true risks accurately, you need to know about the difference between radiation and contamination. The distinction is vital and, unfortunately, one of the most glossed-over and misused facets of the reporting on nuclear energy.
John Taylor's Rebuttal Of Yellen: "There Is Little Evidence Monetary Policy Has Helped Economic Or Job Growth"Submitted by Tyler Durden on 02/11/2014 10:21 -0400
While Janet Yellen's testimony will be uneventful, with her toeing the party line, and the fluff Q&A largely priced in - although everyone is eagerly looking forward to the Maxine Waters grilling - far more interesting in today's Monetary Policy and State of the Economy hearing, will be the Part 2, where various experts (full list here), mostly hawks as it would appear, will provide their rebuttals to Yellen's views. None of them is more anticipated than John Taylor - the Stanford economist whose "rule" the Fed uses, even though Taylor himself has largely disavowed the implications of the Taylor rule under current "extraordinary" conditions and has become one of the most vocal opponents of the Fed's unconventional policy. The punchline from his prepared remarks: "there is little evidence that the policy has helped economic growth or job growth. Growth has been less with the unconventional policies than the Fed originally forecast." Or precisely what we have been saying for about 5 years.
We at the Fed are the platonic guardians of the global financial system. And our logic is undeniable….
The chart below is very familiar to anyone who was observing the hourly turmoil in the European bond market in November of 2011, when Italian bonds crashed, when yields soared to record levels, and every downtick of the Euro could have been its last. What the chart may not show are the dramatic transformations in Italy's government that took place just as the Italian bond spread exploded, which saw the resignation of career-politician Sylvio Berlusconi literally days after yields soared, and the instatement of Goldman technocrat Mario Monti as Italy's next Prime Minister. In fact as some, certainly this website, had suggested the blow out in Italian yields was merely a grand plan orchestrated to usher in a new Italian government that would, with the support of yet another Goldman alum, the ECB's then brand new head Mario Draghi, unleash a new era in Italian life, supposedly one of austerity, and which would give the impression that Europe is being fixed all the while preserving the broken European monetary system for at least another year or two. In other words a grand conspiracy theory of a pre-planned bloodless coup.... And so, as lately so often happens, courtesy of the narrative by Alan Friedman of what really happened that summer, this too conspiracy theory has just become conspiracy fact.
Now that Bitcoin exchange Mt.Gox has terminally discredited itself following the latest, and likely last, withdrawal halt announced late last week which sent the value of Bitcoin tumbling by 25%, Bitcoin traders are left with just two exchange options on which to transact: BTC-e and Bitstamp. And for those using the former to buy and sell the virtual digital currency, things went from bad to worse a few short hours ago, when Bitcoin had its very own "Waddell and Reed" moment, when the price of Bitcoin cratered by over 80% in the span of seconds, after a modest block of just under 6000 Bitcoins sent the price plunging from over $600 to $102.
So what happened to the unemployment rate that it dropped so fast it surprised and embarrassed even the "venerable" Federal Reserve, which had initially expected a 6.5% unemployment rate some time in 2015. To get the answer we go back in time to the last (and only previous) time when the US unemployment rate dropped from roughly 10%, which was in June 1983, to 6.6%, which took place three and half years later, in December 1986 - let's call it the "Reagan Recovery" in short.
No-one knows for sure how big a problem China's economy will eventually face due to the massive credit and money supply growth that has occurred in recent years and no-one know when exactly it will happen either. There have been many dire predictions over the years, but so far none have come true. And yet, it is clear that there is a looming problem of considerable magnitude that won't simply go away painlessly. The greatest credit excesses have been built up after 2008, which suggests that there can be no comfort in the knowledge that 'nothing has happened yet'. Given China's importance to the global economy, it seems impossible for this not to have grave consequences for the rest of the world, in spite of China's peculiar attributes in terms of government control over the economy and the closed capital account.